Sutton v. HEARTH & HOME DISTRIBUTORS, INC.

• Decision Date: 31 March 1995
• Docket Number: Civ. No. L-92-2827.
• Parties: Rob Joseph SUTTON v. HEARTH & HOME DISTRIBUTORS, INC. EMPLOYEE BENEFIT PLAN, et al. v. AMERICAN PIONEER LIFE INS. CO., et al.
• Court: U.S. District Court — District of Maryland

881 F. Supp. 210

Rob Joseph SUTTON v. HEARTH & HOME DISTRIBUTORS, INC. EMPLOYEE BENEFIT PLAN, et al. v. AMERICAN PIONEER LIFE INS. CO., et al.

Civ. No. L-92-2827.

United States District Court, D. Maryland.

March 31, 1995.

Robert Earl Wilson, Upper Marlboro, MD, and E. James Thompson, Jr., Baltimore, MD, for plaintiff.

Helene Victoria Hedian, Randolph C. Knepper, Marleen B. Miller and Stanford G. Gann, Jr., Baltimore, MD, for defendants; Mitchell H. Stabbe, Washington, DC, for third-party defendant American Pioneer Life Ins. Co.; Carol Saffran-Brinks, Baltimore, MD, for third-party defendant Standard Sec. Life Ins. Co. of New York.

MEMORANDUM

LEGG, District Judge.

This case arises from defendants' refusal to reimburse plaintiff Robert Sutton for medical expenses he incurred as a result of a tragic diving accident. While Hearth & Home's benefit plan approved payment for disability benefits, it denied Sutton's claim for reimbursement for medical benefits based on a clause in the plan which exempted medical expenses "arising out of an accident or illness due to the use or misuse of alcohol."¹ Sutton claims that this denial of medical benefits constituted a violation of the Employee Retirement Income Security Act of 1974 (ERISA), as amended, 29 U.S.C. 1001 et seq.

Sutton brings this action against his employer, Hearth & Home Distributors, Inc., its employee benefit plan, the administration committee of the employee benefit plan and three members of the 1990 administration committee, hereinafter collectively referred to as "Hearth & Home". In turn, Hearth and Home has brought third-party complaints against American Pioneer and Standard Security, its excess loss insurers, seeking indemnification for any adjudged liability to Sutton in excess of $20,000, up to $1,000,000.

Presently before the Court are four motions for summary judgment:

(1) Plaintiff Robert Sutton's Motion for Summary Judgment against defendants Hearth & Home;

(2) Defendant Hearth & Home's Motion for Summary Judgment against plaintiff, Robert Sutton;

(3) American Pioneer's Motion for Summary Judgment; and

(4) Standard Security's Motion for Summary Judgment.

The arguments have been fully briefed and no hearing is necessary. Local Rule 105.6 (D.Md.). For the reasons set forth below, the Court shall grant, by separate order, the summary judgment motions filed by defendants' Hearth & Home, American Pioneer, and Standard Security. The Court, therefore, shall deny Robert Sutton's motion for summary judgment.

STATEMENT OF FACTS

The facts can be briefly stated. On June 23, 1990, while employed and insured by Hearth & Home, Sutton was severely injured in a diving accident, rendering him a permanent quadriplegic. During the course of the evening, Sutton had been drinking. First, he attended a wedding reception, and later went to a bar on Kent Island, Maryland. The bar was located on a dock, which contained a wooden railing overlooking the water. Between 11 pm and midnight, Sutton dove head first off the railing into nearby water. He broke his neck and was paralyzed.

Sutton filed a claim with the Plan for reimbursement of his medical bills. The general administration of the Plan is performed by the Employee Benefit Administration Committee ("the Administration Committee"). During 1990, the Administration Committee consisted of the defendants R. Wayne Newsome, Jeanne C. Petersen and Jay Leiken. The Administration committee was authorized to employ agents to perform its duties under the Plan. (Ex. 1 at 58). During 1990, the Administration Committee contracted with Maury, Donnelly & Parr, Inc. ("M.D.P.") as third party administrator for the Plan. M.D.P. had experience in the administration of employee benefit plans. M.D.P. received and processed the claims of persons covered by the Plan. (Petersen Aff. at 1.)

Timothy Morris, an employee of M.D.P., was assigned to handle Sutton's claim. He obtained copies of Sutton's medical records. Throughout the records, there were many references to Sutton's alcohol consumption prior to the accident. The toxicology report indicated that Sutton's blood alcohol level was .112 mg/dl upon his admission to the hospital. When Morris discovered the references to Sutton's alcohol use prior to the accident and the blood alcohol level of .112, he consulted Healthcare Strategies, Inc. for guidance.² Healthcare reviewed the medical records and noted that they were replete with references to alcohol consumption. To interpret the "legal significance" of Sutton's alcohol level, Healthcare Strategies contacted the Maryland State Police and obtained from them the current figures at which blood alcohol concentration was deemed to constitute intoxication. A blood alcohol level of .112 was above the statutory presumption of intoxication for the purposes of driving in Maryland. This information was conveyed to Morris.

After reviewing the medical records and consulting with HealthCare, M.D.P. determined that Plaintiffs' medical expenses were not covered by the Plan because they were "due to the use or misuse of alcohol." Morris sent Sutton a letter advising that his claim of benefits was being denied on the basis of an exclusion in the Plan for medical benefits resulting from the use or misuse of alcohol. (Ex. 6) This clause states:

Expenses resulting from a claim arising out of an accident or illness due to the use or misuse of alcohol or drugs (other than prescribed) are considered ineligible for reimbursement.

After receiving notice that his claim had been denied, Sutton's counsel sent a letter, requesting additional review of the claim. In the letter, he stated that "It is Mr. Sutton's position that his accident was not as a result of use or misuse of alcohol, but was solely caused by the negligence of the owners of the restaurant where the accident occurred." (Ex. 7). The letter did not further explain Sutton's position.³

Morris turned the matter over to Hearth & Home for further review by the Administration Committee. (Morris Aff. at 4). On November 15, 1990, the Administration Committee met to discuss the appeal with its counsel and Arnold Vedrin from Maury, Parr & Donnelly. After discussions, the Administration Committee determined that it had to deny the appeal because Sutton's claim fell within the Alcohol Exclusion of the Plan. By letter dated November 15, 1990, Sutton was advised of the Administration Committee's decision. (Ex. 8) The final decision to deny Sutton's claim was made by Hearth & Home's President, R. Wayne Newsome. Newsome advised Sutton, by letter dated December 19, 1990, that he was in agreement with the decision of the Administration Committee and Timothy Morris to deny the claim. Thus, the Plan has paid no medical benefits to Sutton to date.

If Sutton prevails in his claim, Hearth & Home faces liability for a maximum of $1,000,000 in accordance with the Plan. Hearth & Home was insured for excess liability by American Pioneer in 1990 and 1991, and by Standard Security in 1992. Thus, Hearth and Home has brought third-party complaints against American Pioneer and Standard Security, seeking indemnification for any adjudged liability to Sutton in excess of $20,000, up to $1,000,000.

I. Standard for Summary Judgment

The court may grant summary judgment when the "pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). "The summary judgment inquiry thus scrutinizes the moving party's case to determine whether the non-moving party has proffered sufficient proof, in the form of admissible evidence, that could carry the burden of proof of his claim at trial." Mitchell v. Data General Corp., 12 F.3d 1310, 1316 (4th Cir.1993). In determining whether a genuine issue of material fact exists, the Court views the facts, and all reasonable inferences to be drawn from them, in the light most favorable to the non-moving party. Pulliam Inv. Co. v. Cameo Properties, 810 F.2d 1282, 1286 (4th Cir.1987); Ross v. Communications Satellite Corp., 759 F.2d 355 (4th Cir.1985).

II. Sutton's and Hearth Home's Cross Motions for Summary Judgment

There are several issues that arise with respect to these cross-motions for summary judgment. First, under what standard should this Court review the denial of Sutton's benefits? Second, may the Court consider additional evidence than that which the administrators had when they decided to deny Sutton's claim? Third, given the standards and information available, should the Court disturb the plan's decision to deny benefits?

a) Standard of Review for Plan's Decision

As an initial matter, the Court must determine the standard of review to apply to the administrator's denial of benefits. Although the plaintiff contends that a de novo review is appropriate, the Court agrees with the defendants that the administrators' decision may not be disturbed unless it constituted an abuse of discretion.

In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), the Supreme Court clarified the standard of review for denials of pension benefits. "A denial of benefits ... is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Id. at 115, 109 S.Ct. at 956-57 (emphasis added). Thus, following Bruch, the Court must first decide "whether the particular plan at issue vests in its administrators discretion either to settle disputed eligibility questions or to construe doubtful provisions of the plan itself." de Nobel v. Vitro Corp., 885 F.2d 1180, 1186 (4th Cir.1989). If the plan allows for such discretion, the "reviewing court may...